ASIATODAY.ID, WASHINGTON – Escalating conflict in the Middle East is expected to drag global economic growth to its lowest level since the COVID-19 pandemic, as surging energy prices, rising inflation, and higher borrowing costs weigh heavily on economies worldwide.
According to the latest Global Economic Prospects report released by the , global growth is forecast to slow to 2.5% in 2026, down from 2.9% in 2025. Economic projections for two-thirds of the world’s economies have been downgraded since January.
While global growth is expected to recover modestly to 2.8% in 2027, it will remain 0.4 percentage points below the average recorded during the 2010s. The prolonged slowdown is particularly affecting developing economies, which continue to struggle to narrow the income gap with advanced nations.
The report finds that by 2028, developing economies excluding China and India will have experienced nearly a decade without meaningful progress in closing their per capita income gap with advanced economies.
“Developing countries have faced a series of challenges over the last decade,” said Ajay Banga , President of the World Bank Group quoted on June 15, 2026.
“The impact differs by country, but the basic test is the same: protect people and preserve stability today, without giving up on growth and jobs tomorrow,” Banga said.
He added that the World Bank is providing liquidity where it is needed most and stands ready to offer additional financing, guarantees, and private-sector solutions should economic pressures intensify.
Energy Shock Fuels Inflation
One of the most significant consequences of the conflict has been the disruption of global energy markets following the closure of the Strait of Hormuz.
As a result, Brent crude oil prices are projected to average US$94 per barrel in 2026, approximately 36% higher than in 2025. Fertilizer prices are also expected to rise sharply, increasing pressure on global food supplies and consumer prices.
Consequently, global inflation is forecast to accelerate to 4.0% in 2026, up from 3.3% in 2025.
The World Bank warns that downside risks remain substantial. Should energy supply disruptions become more severe and trigger significant financial stress, global growth could plunge to just 1.3% in 2026, while inflation could climb to 4.4%.
Developing Economies Face the Biggest Hit
Growth in developing economies is expected to slow to 3.6% in 2026, the weakest pace since the pandemic, down from 4.4% in 2025. A recovery to 4.2% is projected for 2027.
The Gulf economies directly affected by the conflict are expected to suffer the sharpest slowdown, with growth falling from 3.9% in 2025 to near zero in 2026.
However, the report projects a strong rebound in 2027–2028, with growth reaching around 5% as trade recovers and reconstruction spending gains momentum.
World Bank Ready to Deploy Up to US$100 Billion
In response to the crisis, the World Bank Group has pledged significant financial support for affected developing countries.
The institution is immediately making US$50–60 billion available through existing financing instruments, including US$25 billion in pre-arranged funding. The resources can be used to strengthen social safety nets, enhance fiscal capacity, and provide working capital and liquidity support for businesses and farmers.
More than 30 countries are already working with the World Bank to improve preparedness and ensure a rapid response under the organization’s crisis-support framework.
If the conflict and its economic repercussions persist, the World Bank says it could scale up assistance to US$80–100 billion over the next 15 months.
South Asia Remains the Fastest-Growing Region
Despite the global slowdown, South Asia is expected to remain the world’s fastest-growing region in 2026. Nevertheless, growth is projected to ease from 7.0% in 2025 to 6.3% in 2026.
Meanwhile, Sub-Saharan Africa is also facing mounting challenges, particularly from inflationary pressures linked to rising food prices and fertilizer shortages.
“This conflict has taken a toll on global activity, but every crisis also brings an opportunity,” said Ayhan Kose, Deputy Chief Economist and Director of the Prospects Group at the World Bank.
“This moment should be used to strengthen policy frameworks, invest in infrastructure, accelerate business-enabling reforms, and mobilize private capital to support job creation at scale,” he said.
Debt Burdens and Commodity Dependence Under Scrutiny
The report also highlights mounting fiscal challenges across developing economies.
Approximately two-thirds of developing countries—and nearly 90% of low-income nations—are commodity exporters. These economies often face weaker fiscal positions because government revenues remain highly dependent on volatile commodity prices.
The World Bank notes that much of the revenue generated during commodity booms is typically spent rather than saved, leaving countries vulnerable when prices decline.
Rising public debt presents an additional challenge. Since 2010, aggregate government debt across developing economies has increased from below 40% of GDP to more than 70%.
According to the report, countries with higher debt levels face significantly higher borrowing costs. Conversely, reducing debt burdens can create valuable fiscal space for investments in infrastructure, healthcare, and education—investments that are critical to long-term economic growth and job creation. (Midwan)
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